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tv   Bloomberg Markets European Close  Bloomberg  June 22, 2016 11:00am-12:01pm EDT

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frequently small businesses or startup businesses, the owners will use their credit cards and personal credit worthiness in order to take out loans. they may have less access to capital that established as this. >> which has always been true. ms. yellen: i wouldn't say that i've seen any data -- >> we are stepping away for a moment from our coverage of janet yellen, chairman of the federal reserve. at alive feedg today being given by donald trump in lower manhattan, hoping to recapture the voter attention it's recently been focused on his internal campaigns and the campaign's fundraising issues. among the headlines out of this reach so far, trump saying that clinton ran the state department .ike a hedge fund
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going back now to capitol hill to the chair's question and answer session, but if you would like to continue watching the speech you can find it on your bloomberg at life for our live events channel. seenellen: we have not negative changes that i am aware of. >> is this true throughout the regions? : to myle yellen knowledge. >> part two of the question, you said that that's not a material reality, so part two is more challenging. is it attributable to new banking regulators? is the fed observing dislocations in the credit market to small and medium enterprises that might be attributable to new regulations? hon. yellen: we know that
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community banks are struggling under regulatory burdens. we are doing everything we possibly can to address that. the fact we are in the low interest rate environment tends to put downward rusher on net interest margins that harms bank profitability. so, it is a difficult environment for community bank. as i said, we have always been in rural areas and, for some small businesses, there have been difficulties in gaining access to reddit. but i have not seen a change that would be attributable to the financial regulations. >> in my last 32nd two said that the fed was doing everything they could to alleviate the burden on community banks. can you elaborate on that? we havelen: significantly increased the exemption under the small bank soding company policy rules
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that now all holding companies under $1 billion are not subject to our consolidated capital rules. we have changed our exam processes to do more work off-site. to make our exams more tailored through the process. we are looking to reduce our regulatory burden. and we are contemplating the simplified capital rule for well-capitalized banks. >> the time of the gentleman from connecticut has expired. the chair recognizes the gentleman from missouri. >> thank you, mr. chairman. over here, miss yellen. conference with chairman bernanke in 2011, ask a simple question about the thousands of pages of dodd frank. he was asked -- has anyone
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bothered to study the cumulative effect of these things? is all of this holding back the economy this point? chairman bernanke responded -- has anyone done a comprehensive analysis of the impact? i can't attend anybody really has. it's too quantitative -- complicated. we don't really have the quantitative tools to do that. following up on that line of lessening here, you are asked -- does the fed study any of this? has analysis been done on the cumulative effect of dodd frank with broader economic variables and job creation? have you done any studies on that? hon. yellen: well, perhaps a comprehensive analysis of everything that you're looking i guessundertaken area i would agree with -- undertaken. i guess i would agree with chairman bernanke's remarks.
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they set out a roadmap in terms of ways they wanted to see financial regulation. >> if you don't have the tools, the ability to study this, how can you make regulations that pinpoint what you do the economy or the effect of those rules. every time we put out a rule we do a study to minimize burden on the middle and we take public comments and ask for alternatives that could achieve the same goals with reduced burden. so, we are taking cost into account in trying to minimize the cost. >> if you are doing it, that an chair, there has been no bank charter issued in the last five years. why? what is your reasoning for that? regulation? low interest rate? >> the work that i've seen suggest that the
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challenging economic environment , a low interest rate -- i'm not aware of any studies that suggest that regulations are responsible for that. >> in your testimony you have coming back housing gradually. at the homebuilding market there are fewer mortgage loans now than there were a year or three ago. and i talked to my local community banks. there are some that got out of the home mortgage lending business completely. any point tok at rules and regulations as the theyn for not doing this? can't hold thanks folio qualified, inferring that there is a risk to the loans. so, now you have community banks no longer serving their
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communities. which is disastrous, in my mind. so, the question is these banks are telling me that rules and regulations are you mr. happening. and the main car -- main culprit here, do you coordinate at all with other agencies? either the treasury or yourselves, other agencies to see if there is a cumulative effect it could be negative out there that everyone should be watching for? >> well, we coordinate many of our rules with other banking agencies. , they case of the cfp be were required to consult with us. we often offer comments. >> did they accept your comments or ignore them? numberllen: there are a of them. i would agree with you, when it comes to mortgage credit, the new rules that we have that are designed to end the abuses that
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andaw in subprime lending in the housing crisis, they have made credit more difficult to obtain for individuals. >> this all goes back to monetary policy, rules and regulations strangling the economy so that they can't participate. whether you are adjusting interest rates are playing with unemployment, and all goes back to the fact that you are dealing with lives every day and the rules and regulations you are messing with. we need to understand the them orton's of that. when you see the impact, mortgage loans, bank not being formed, a while ago you talked about small businesses. we have had fewer businesses created in the last five or six years then we lost. that's the wrong direction. small businesses are where you generate a good job. if we are not allowing those folks to be creative, we're hurting ourselves and it goes back to rules, regulations, and
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monetary policy. please do the research. thank you. >> the chernow recognizes the gentleman from delaware. >> thank you for coming in today. you are here for your twice per year report on the hawkins. i haven't been able to read all of your monetary policy were work or your opening statement, but i have gotten through some of it and i really just have a couple of questions that maybe you could address. on you say that inflation has continued to run below the 2% objective. the fed market committee expects inflation to rise to that level over the medium-term. your targeting there. however the pace of improvement in the labor market appears to have slowed more recently, suggesting that your cautious approach remains appropriate. what other things in the economy suggests that it may be slowing down? we are pretty far out in this economic expansion.
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other things that you could too? so, there are mixed developments in the economy. one thing that we noted was that investments bending has been unusually weak in recent months. particularlyon of weak investment spending -- of course it has been very weak but because of the decline in ,rilling and mining activities the recounts are way down because of the klein in energy prices. but we have seen weakness also outside of that. >> is that an overall plus or minus for the economy? hon. yellen: it's not a plus for the economy. first of all, it's a part of spending that supports growth that is highly relative to productivity growth. productivity growth has also slowed. so, we are watching that carefully.
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we have a drag on slow growth in the rest of the world that is the strong dollar negatively trade exposed sectors. >> some significant headwinds. yes, but on the other hand we do have strengths. consumer spending is particularly strong. we've had an economy that is for the last four quarters growing at about 2% growth. it was quite slow in the first order at the end of last year and looks to be picking up. we are watching things. i don't want to send a message of pessimism about the economy and where we are going. >> so, there is some pessimism underneath the unemployment numbers, suggesting that certain subgroup have higher unemployment rate. and you note that in the report. anything significant there that
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you can point to with respect to that issue? >> think we should be very concerned about the fact that there are some groups of the population who experience lower income and more distress in the labor market. think about what we can do to address the problem. they have seen improvement. >> what about the quality of the jobs in that job? one of the guys in my conversation yes they said that new old jobs. and i knew exactly what he was talking about. you and of manufacturing jobs that we had a chrysler, general motors, manufacturing jobs that paid a good income. can you comment on that, the quality of jobs being created? hon. yellen: probably the quality of the jobs that have an created, we have read a lot of high-end jobs. >> high-end jobs? hon. yellen: high-end jobs were
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skilled workers area like highly educated workers. right.llen: a lot of the kinds of jobs you are referring to, middle income have disappeared. they were declined and hard-hit in the downturn. over a longer. of time, probably since the mid-80's there have been a thatnation of pressures have made those jobs fewer and far between. >> i don't know that you have monetary policy tools that you can use to address that, but on our side, on the school policy we should be thinking about the kinds of tools we might deploy? >> at think so. we are talking secular trends related to the nature of change and how it has raised the demand
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for skilled labor. trends relating to localization. and then -- what are we doing in terms of education? workforce development investment , in your domain. >> thank you very much. >> mr. duffy, chairman of the oversight and investigations committee. >> welcome, chair yellen. good to see you. i listened intently to your testimony and commentary on the headwinds to our economy. it has a direct impact on our issuance. i did hear you comment on issues that concern me. last year there were 81,000 pages of new regulation. there were 550,000 pages of regulation. that aou consider headwind for economic growth?
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i don't know if you have new pages at the fed. hon. yellen: i don't think we do. we have internal regulations, certainly. regulation have put into a generally. >> at sign question. had -- that's not my question. are these headwinds or not? hon. yellen: it's difficult to quantify if it's a headwind. businesses certainly site regulation as a factor affecting their decision-making. what else you cited? if the businesses that you talk to cite it, why don't? i actually don't think it is the most important headwind. >> the corporate tax rate, 39.1%. the oecd average is 24.1%.
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we pay percent more orbotech. that's 15% less anything goes into wages and economic development, research and development. you see that as a headwind? hon. yellen: i think it's widely agreed that there could the constructive changes. >> i'm from wisconsin. they have manufacturing facilities there was also in all over the country. most manufacturers that in the have all left america. they've gone overseas. he's one of the few that are left. per employee he spends $15,000 per year on insurance and $20,000 per employee on regulatory compliance. $35,000 goes out the door per employee before he pays them one red cent salary. do you see that as a headwind? hon. yellen: these tax arrangements to have impacts on
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the profitability of various is this activities. quite so, you would bet that would be a headwind? or is that a benefit? is that help them grow jobs with salaries in this company? the $20,000 and regulatory lights cost? different countries have different systems for dealing with health care and financing it. >> i will accept that as a nonanswer. changing course a little bit, looking back at the 2008 isis, you had been at the fed for a while. were there any banks that failed that had a leverage ratio of 10% or higher? and if so, could you give me the names come if you would? hon. yellen: i can tell you that many of the banks that failed were well-capitalized.
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>> that's on the question. do you know any that had 10% or higher the tailed? i've looked and i haven't found one. i think the you are aware that this committee is talking about a reformed to dodd frank. i know you are aware that any banks can win about the cost of compliance. and what that does for them to make loans that would be good loans that they can usually make but now they can't because of the impact on the economy, economic growth, job creation. do you oppose the idea that if you have a high leverage ratio hold the capital you can get out of the relations that come from the fed and other regulators? hon. yellen: i do think that for community banks it would worthwhile to put in place a simplified capital regime.
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the details, i'm not certain of them, but we're looking at this as well. >> do you agree that there's a relationship? hon. yellen: for community banks, yes. >> safer, less risk in the economy. hon. yellen: for community banks, i think a simplified -- me >> the answer is no? for larger banks? systemicallyfor important banks, the answer is no. >> the time of the gentleman has expired. now the gentleman from illinois. >> i have a quick questions for the record. earlier you indicated that there was a situation of super strong economic row for the fed may have negative income. i was wondering if you could
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provide a brief writeup of what that scenario would like -- look like under the consolidated sheet of the government and the fact that the super strong economic growth would be accompanied by a large increase in revenues. would it be possible for you to make a brief write up? or if you have a more detailed we could yellen: certainly do that. >> earlier this week, a macroeconomic analysis of the thecy proposals of one of presidential candidates were proposed. it's my understanding that you have a similar model the run? i was wondering if it would be possible for you to run it in your models and see if you can reproduce the results. they were rather impressive. trillions of dollars in lost economic activity. due to at least one set of these policy proposals.
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we are aen: nonpartisan organization and i , as a leadernt to in our organization, for our organization to be involved in partisan issues. simply verifying a mathematical question, a modeling question. i'm not asking you to question or evaluate the assumptions, just that under these assumptions do you reproduce those numbers. obviously policymakers are at the mercy of the details of these complex macro models. it would be reassuring to understand that there is some agreement between macroeconomists. that you are talking about them in the terms. one of -- hon. yellen: one of our models is in the public domain. we publish it on our website. if someone wanted to do it, they could download the model and
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reproduce those. with theu familiar movies model? hon. yellen: i'm not deeply familiar with the model. i guess it's similar in many ways to ours. again, i'm not similar about the details. ours is not going to perform that analysis. technical detailed, russian. growing line for derivative trades, i believe that they are on schedule to ,ave them go live in september where there is some foot dragging for parts of it. is that something you are willing to engage the ec, that they not do this, not the ladies?
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>> we have worked hard to put these in place and it's important that we put these in place here. my understanding is that the delay will be very short. >> thank you. another technical issue, supplemental leverage ratio rule , it holds capital against the federal reserve. where the federal reserve will not be a reliable counterparty. can you reflect on the logic of this capital against deposits? typically a capital regime is not the binding wire it's a backup simple measure. assessing capital against entire balance sheet. based on its size.
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without differentiating the riskiness of different assets. custody in those unique positions. >> the deposits, that's the behavior think you want to encourage. i think you should continue to look at that. we will do so. >> the last thing that i think is relevant to those wearing the green shirts in the audience, the federal reserve recently published a fight if paper called dub's for the rich, hawks for the poor. that the real distribution consequences in response to a monetary shock is constant employment or pricing. is that thinking leaking into your consciousness? >> we are definitely focused on maximum employment.
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with key install groups. >> the time is expired. we now recognize the gentleman from new hampshire. >> since the federal reserve was created, we seen stagflation, the great depression, the great recession, and currently one of the slowest economic reveries in quite some time. when the reserve makes artificial uninteresting, failing to properly communicate monetary, it creates market volatility in my and we the attractiveness of the market, but it harder or economic activities or all -- economic opportunities for all americans. institutions from those who believe the process has become arbitrary and unpredictable.
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that the exercise is not tailored to their size and complexity, resulting in significant cost that outweigh any potential benefit. to increase the transparency, to ensure the congress can hold the andaccountable for its role i would like to ask you if you would support legislation requiring them to issue regulations subject to public notice and comment. in conducting those stress tests? >> at think it's important that the scenarios we current and reflect the risks that we assessed the important and relevant. at the particular time that we are conducting those stress test
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and the delay that would because by putting out for comment particular scenarios, resulting in the test being stale. put up a great deal of information about the stress. our approach has been put up for public comment. symposiums.l we put out a great deal of information and i don't think it result in anything stronger. >> how would that change the annual basis? hon. yellen: we have new scenarios that we give to the firm's. ex annually? differentn: scenarios, annually. ask why could it not be updated annually? >> it would mean that the delay in public comment would mean that we would have to
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start very much earlier and would have the advantage of what's taken place. >> you don't agree to complete that in 12 months? hon. yellen: i don't think it would add anything to the process and it would make the scenario stale. >> it's important for accountability entrance baronetcy. if we had this kind of argument on an annual basis, i think we would have both, but i want to move on to a different issue. don frank established the cfp be. can you tell me which of richard forgery's decisions must resubmit it to you for your approval? don'tellen: so, we approve decisions. the cfp be tested consult with us under the worst of producing proposals. i believe that they have done so
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when we have tried to provide feedback and useful input. forgeryong does richard consult with you personally? hon. yellen: i have not. >> he consults with? hon. yellen: our staff. >> do you review for approved the euro budget? hon. yellen: we don't approve the budget. >> can you by law? hon. yellen: i believe the answer is no. >> i'm told that the cfp be gets its funding by simply sending a letter. accurate?w if that's >> i don't know the details of the budget. but we follow the law. >> you personally don't review the west? hon. yellen: no. >> would you want to? is the head of the federal created since they are under their purview?
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hon. yellen: congress set up a system in which we find them. >> any idea what the last budget request was? hon. yellen: i don't recall. >> time of the gentleman has expired. the chair now recognize the gentleman from washington, mr. hack. --share yellen, in arguably yellen, you have a good track record. car sales are up, home sales are up. the constant, steady drumbeat of private-sector job creation has been accumulated. yet i cannot shake the feeling that it is way too premature to put out the mission accomplished barrier on the aircraft carrier. i think most americans agree i also think that the reason for that is the absence of wage growth. i think we are picking up or
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down 2%. i will do it first. frankly, chair, that's right that's barely diminished compared to the last recovery area my question is very straightforward. when does america get a pay raise? hon. yellen: we are beginning to see if slightly faster wage growth based on hourly earnings over the last 12 that's 2.5% up the low-level that it was. readings on comp nation, hourly compensation, they are very noisy. it's hard to know, but it looks like we are seeing faster wage growth. other measures, other wage indicators like the wage tracker do show an improvement wage growth.
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that as the labor market continues to improve i certainly expect will be our policy to see further improvement that will move up. i would say one factor that the negative was wrecked to wage , forh that we didn't have example in the second half of the 90, productivity growth has been very slow. if you ask -- what is a sustainable level of wage growth ? given our inflation target, kind of a rough measure. of course, this applies over long times, not a quarter or even a year. wages can grow at the rate of productivity growth plus the rate of inflation. target, 2% inflation you would expect wage growth of growth.productivity
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since 2010hat productivity growth has been running at a meager half of ascent or year. >> i note a growing body of literature in scholarship around the russian, that we may not be accurately measuring it anymore. you believe we are measuring it accurately? and can i ask you a question? i would like to ask you russian, however, about the relationship between employment and wage growth. we are at the fed's historic definition of full employment. 4.7%. above still significantly the unused six. i think that the latest number was 9.7%.
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greater than it was before the recession. point does it have to be at two pounds to what you would seem to be full of ointment? what would be the relationship of that measure of employment. we still have 10% of the employment base that either isn't employed and wants to be, discouraged or working part-time and wants to work full-time. what is the relationship with the ointment which u6 is full employment. and then what would be the effect on wage increases? at the end of the day i think that most americans and even everybody on this panel would like to see america get a pay raise. >> i agree with what you just said. u6 is not back to pre-recession
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levels. i would say 2007 levels. three is. involuntary, part-time toloyment is high relative -- >> can you give me a number? what it is under u6? arrange? hon. yellen: i'm not sure. it does show a margin of slack, adding part-time employment to an unemployed person is a difficult thing to do. >> thank you. let me conclude by saying i'm not sure why you take your foot off the pedal before we get there. >> the chair now recognizes the gentleman from oklahoma, mr. lucas. >> thank you. as you know i sit on the house agriculture committee and have a particular interest in the creation and implementation of
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rules governing derivatives markets ensuring that a level they feel the for u.s. companies. i would like to commend the fed 's efforts in working with global standards within the markets. we can all agree that it's in the best interest of u.s. competitiveness that the global standards are developed and as so, there is consistency in the in there effective dates throughout. jurisdictions. announcement that it will delay implementation of the margin for unclear, over-the-counter derivatives until mid-2017. the u.s. currently plans to move forward with an agreed-upon implementation date of september 1, 2016. while the u.s. is ready to move forward, i'm certain rough impact that this variation will have on u.s. companies. given this likely variation date on the implementation, what can
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be done to mitigate fragmentation to ensure a level playing field that it lists for u.s. firms? hon. yellen: well, we have worked very hard to get ready to implement these rules. the firms are ready to put them into effect. my understanding is that the delay from the eu is going to be short and we will continue to monitor that. these are markets where it's important to have a levy death level playing field, i agree. >> even in the briefest of times, presuming it's a year or concernedld we be that market participants will limit trading with u.s. counterparties during this time? will we change their habits and patterns while they look for standards or opportunities that
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might be slightly more advantageous, assuming that the new rules be more existence of the restrictive system? should we be concerned that people will do business outside the united dates during the time? 7 hopefully -- hon. yellen: hopefully it will be a short time. >> ultimately run going as i represent different seasonal home a in agriculture and energy to these products, both in the production of, the processing of , the ultimate retail sales of. they are products that i am told that if the bankers system on using them, most banking regulators at the eight and federal level insist that they be used. my concern is that if we use -- if we move forward head of the europeans, it will create a situation for month, for a year
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that will disadvantage the consumers of the riveter product. once the patterns are established, will we be able to overcome that? ,ltimately am asking you suggesting to you, it might well be in the best interest of the fed and the economy to continue to try to ordinate that nature to the europeans. if they are not going in 16, maybe we shouldn't go either? do you see where i'm coming from on this point? >> it is an issue that we need to watch carefully. if there is a delay in europe, we need to consider what impact it will have -- and work closely with the europeans. >> we are talking about the tremendous amount of dollars in business.
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we're talking about establishing pattern relationship. i just worry that this will relate an undue burden on my constituents and on the market makers in this country and that we won't be able to recover. whether it is an accident or a good business tactic, i don't know. we need to be coordinated in whatever we do either is much as they. iq for acknowledging that, chair. with that, on the behalf of my farmers and ranchers, i yield back. >> the gentleman yields back. thechair now recognizes gentleman from california, mr. sherman. >> the gentleman from wisconsin talk to you about a number of pages of regulations. i practice and advised a lot of all businesses. this idea of number of pages of regulations is a great soundbite , but has nothing to do with
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actually making it easier for businesses to transact. at tax law, thank god we have long pages of regulations to find out what the answer is. ,n the area of antitrust law the regulations are basically nonexistent. you go to a law library and you of courtred of pages decisions and you still don't know the answer. the idea that more pages of business regulations means more problems for business is a great political soundbite, but it is actually government agencies clarifying what the law means. as to the tax rate, i would go that we don't have a value added tax in this country. that no one has put forth a plan to replace the revenue from a decline in the incontact.
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and that the one thing that the majority party is suggesting is eliminating the earned income tax credit. to really socket to families trying to make it on $25,000 per year. there is a worse for loss of manufacturing jobs. that is not because we have regulations that clarify what congressional statutes mean. that's because we got really bad trade deals that congress has ratified or approved. i will point out that congress is now geared up the chicanery of a lame-duck session to approve a tpp deal that is terrible for america, so terrible that you can't find a presidential candidate and to support it. chairman yellen, you have been told in this room by many that your rates are too low, your balance sheet is too big. people who say that all wrong.
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america is underperforming. the inflation rate is lower than your target. our labor participation rate is lower than everyone target. as to the size of your balance sheet, i know that you focus on the effect it has on the economy as a whole. but there is also the tens of billions of dollars that you turnover to the treasury. membersnd your fellow ever spend any time wondering whether congress is going to have the money to provide lunch program? school breakfast program? when you factor in how big your balance sheet should be, do you envision hungry kids here in america? and how the money that you turnover to this congress can be used to feed them? hon. yellen: we are very focused
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on the dual mandate that congress is even a. namely full employment and price stability. the size of our balance sheet and the stance of monetary policy is all designed to promote those objectives. like i would just say -- hon. yellen: but we are pleased to turn over $100 billion check. but that is not what drives policy. >> speaking on behalf of a congress that would otherwise have to cut cancer research, or cut school lunches, thank you for the $100 billion checks. please, do factor that. the world is focused on brexit. it may be good or bad, long-term, for the world. we don't know. that's a decision or written to make. there are some of the extreme war painting this as some sort of immediate world calamity.
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i just wanted to ask you a question about your schedule. have you scheduled some sort of emergency meeting on friday because you envision some great calamity happening to the world on thursday? or is the british boat just one of the many things that you will consider at the next regularly scheduled meeting? >> it is a risk we are monitoring. we will be that watching closely to see what the vote is and what possible repercussions it might have. >> you haven't blocked off friday and saturday on your schedule for emergency meetings as if the hurricane is coming to envelop the entire world? hon. yellen: no, i haven't. quite thank you. >> the time of the gentleman has expired. we now recognize mr. royce, the gentleman from california. quite welcome. i worry that the federal reserve has created a third pillar of
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monetary policy. that of a stable and rising stock market. then chairmanause bernanke, when he appeared here, stated repeatedly that the goal of qe was to increase asset prices like a stock market to create a wealth effect. that seemed as though that was a goal. then,ld stand to reason, that in deciding to raise rates and reduce the fed policy qe balance sheet, standing at his own record of 4.5 trillion, one would have to be there to accept the opposite result. a declining stock market and a slight deflation of the asset bubble that qe created. yet every time in the past three years when there has been a hint of raising rates and the stock
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market has declined during the, the fed has cited stock market volatility is one of the reasons to state a course and hold rates to zero. the fed has backed away so many normalization,t i think this is a conceptual problem here. expects stock market volatility to diminish the odd of a rate increase. so, madam chair, is having a stable and rising stock market a third pillar of the federal reserve's monetary policy? if i go back to what i originally heard ben bernanke -- hon. yellen: it is not a third pillar. we do not target the stock price is not -- stock prices. it not an appropriate thing for
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us to do. write a cart you would say that. the question i have is a follow-up is -- does that mean the are prepared accept stock market volatility? or a slight deflating of the asset bubbles as the fed proceeds towards normalization? hon. yellen: we are going to look at what the trajectory is for the economy. for the goals that congress has assigned us, namely inflation and maximum payment. taking policies that we think are real to foster them. recovers.the economy we have said that we anticipate raising rates. what implications that may have stock rices? one should not assume that it is not mrs. -- that it necessarily
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be a negative scenario for stock prices. higher rates to some extent are already built into longer-term interest rates. longer-term interest rates are anticipating a path of rising short-term rates. they do matter to stock market valuations. so do earnings in the strong growth economy. but whatever, we are not targeting equity prices. we are trying to achieve outcomes for the economy. >> there is one -- one more aspect of this. in september you were asked global that given the interconnectedness, the global inflation globally that we were seeing, were you worried that you might never escape from this zero lower bound situation? at the time you answered -- while you could not really without, that was not how you saw the outlook or the way to the committee sees the outlook, ok?
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since that time in february, governor brenner suggested that the financial tightening associated with cross-border spillovers might be limiting to the extent in which u.s. policy diverges from major economies. the new york fed president has that global consequences can impact the monetary policy transmission the in the u.s., influencing the effectiveness of our monetary policy. so, my question is -- restating the question from last year. not will we never escape, but will be escape anytime soon? and maybe to put it more clearly, does the fed have the capacity to defy the global pattern of zero or negative rates? if that's the global reality? hon. yellen: we do have the capacity
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to have different rates than the rest of the world. we do have to recognize differentials are policy that impact, for example, the value of the dollar. that is a linkage back to the u.s. economy. those linkages, as my colleague said, are important. but the bottom line about what happened in the rest of the world, their policies and does matter. what it doesn't mean we could never. >> the time of the gentleman, you have hired. the chair now recognizes the gentleman from new york, miss velazquez. >> the current wealth gap between upper-income households in the rest of the country is the widest that it's been in the last years. the great recession exacerbated this troubling gap and have
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profound effect on racial lines. on average, african-americans lost 52% of their wealth. latinos lost 62%. white only lost 15%. what type of ramifications of this ratio wealth gap have on our country's long-term economic growth? 1 hon. yellen: i think it's a trend that you discussed in the aretary policy will work extremely disturbing. there has been research has tried to look at the links between in wally and wrote. frankly, they are. i don't think that we fully understand them. but one linkage is that higher
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may spend lessls of their income than lower income individuals. inequality may suppress the growth rate of consumer spending. in that way,th there may be linkages in terms of ability and desire. opportunity for education and training that can how long run negative impact on both. i think we are just beginning to understand these complicated linkages. but it is certainly a very disturbing phenomenon. >> there is a correlation between the type of public policy that an act to address those disparities. it will have long-term consequences. that itlen: i believe can have long-term consequences.
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>> as the economy continues to gain strength and we move back towards normalizing policy, they will have a normal impact on the market. this has a number of small businesses started about the availability of cost of capital. is there any indication that the last rates increase has an impact on credit availability for small businesses? hon. yellen: i mean, i'm not, we raise rates by 25 basis. that's a very small amount. i'm not aware of any significant repercussions that it has had for the cost of consumer that it. expect thed that we path of great be gradual and that we will be very cautious about raising rates. we will only do so in the context of an economy that is
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performing well with a strong job market. and we need a good pace, where people's incomes are rising. we would do that to make sure that we achieve a price stability, our congressional objective. >> so, the wealth gap between whites, blacks, latinos, i would like to raise another issue. because of student loans. atdent loan debt now stands $1.35 trillion. a figure that has tripled over the past decade. some experts have ordered that the average student loan debt 37 house of 2016 is and per borrower. what type of consequences for lifetime wealth reissued do these levels of debt present for young people? first of all, the
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importance of gaining in education and the advantages that come with that in the higher income make it critically important that funds be to gaine to students that education. so, let me start there. undertakes student that debt, takes on that debt, and has happens all too often doesn't end up completing a degree or goes to an institution that doesn't provide training that enables them to get that higher wage job, that can be a very, very serious orton. i think for many minorities is the huge burden. so, actually we plan to hold at on this a conference topic next november.
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we will look at this issue and focus particularly on minority communities. >> the time of the gentle lady has fired. the chair now recognizes the gentleman from direct echo, mr. pierce. >> thank you for being here today area let me wrap up some of the old is this year. like a friend from washington said -- when does america get a pay raise? in your answer is sort of hinted that if the global market continues to improve. is that what i heard you say? if it continues to improve we can expect greater wage growth? hon. yellen: i think we will see some pickup and wage growth. weid want to indicate that have at the moment low productivity growth. very low. that wage growth will be greater overtime as productivity growth picks up.
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thatguess my main point is there are many who see the global market is not improving at all area kind of the inference that it is moving the right direction, doing a little bit more of it, it is one that they have differing opinions on. for instance just in the recent days a significant article came out talking about business spending being down, exports are down. consumers are cautious. many of the foreign countries are having difficulty. that is a little bit in contrast to your report. you talk about the 14 million jobs created. is that -- that's one of your objectives. does that -- you also refer to the unemployment rate in below 5%. that would all indicate a fairly good opinion from within the federal reserve about the condition of the economy. right? hon.ing that
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yellen: yeah, i would say that there are jobs available. >> the recovery is moving along. hon. yellen: we have achieved a lot and got a much better place. >> my question really is -- february of 2014 you stated that you knew this was difficult for seniors. zero interest rate, they typically do liquid ends without risk. wonder when they will see those rates come back. seniors are the ones who paid the bill for the entire thing. when we drive the interest rates down, it penalizes their savings . they tell me -- i lived my life correctly. i saved up money, i paid for my house, you messed up the housing
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market and i money is worth nothing in the bank. -- a rateey see and of return? hon. yellen: if the economy progresses along the lines i spectre think it will be rep. pearce: a previously answered my question that he felt like we made a lot of progress, and yet, seniors have not seen any progress. that is one of the continuing problems that we have. now and youto ask mentioned that is well known that the federal reserve's objective is maximum employment. do you have a handbook that you put out -- how to achieve maximum employment? something that political candidates like maybe a candidate for president might say she is going to get rid of all the coal mining jobs? do you all have a handbook that says if you do that you will really put pressure on the economy over here?